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Elusive Commercial Mortgage Rates

Elusive Commercial Mortgage Rates

Commercial mortgage rates are at historical lows for many transaction structures. For properties less than 50% LTV, borrowers can enjoy rates between 2.25% and 2.9% fixed for 10 years with cashflow strong, steady, and predictable despite the current economic climate. During the pandemic; however, with lower valuations on certain asset classes, meeting lenders’ underwriting requirements to achieve these low rates may be challenging. Nonetheless, Plan B is pretty good with rates between 3.5% to 5.5% for most deals with LTVs up to 75%. And for certain “in-favor” transactions commercial mortgage broker Financial Compound is currently closing loans with commercial real estate lenders fixed for 10 years at 2.85% rate, 25 year amortization up to 80% LTV. At these low rates borrowers may consider consolidating unsecured debt into first mortgages. Financial Compound is able to assist borrowers at all leverage points, property types, and deal structures. With a team of 5 fulltime analysts working together for as long as 15 years we can process your financing request quickly and efficiently.

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Covid 19 and Commercial Real Estate Financing

Covid 19 and Commercial Real Estate Financing

While many lenders have pushed the pause button during Covid 19, the commercial real estate financing scenario is significantly more robust compared to the credit freeze in the 2009 recession. With historically low rates now is a great time to borrow. Commercial mortgage broker Financial Compound is currently processing about a dozen loans in the 2.85% to 5.25% interest rate range. There are enough active lenders to keep commercial mortgage rates and terms tight. We don’t want to jinx anything but Financial Compound is having one of our best years. We’ve looked at a few large private investors and started refinancing their portfolios as well as some acquisitions and construction commercial loans. Its nice to do multiple transactions with the same customer over a short span of time as we have all the relevant paperwork on hand.

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Commercial Mortgage Webinar February 2020 Financial Compound Michael Schwartz Participates

Michael Schwartz participates in commercial mortgage webinar on February 2020

Commercial real estate financing webinar moderated by David Gritz explores joint venture equity structures and creative commercial real estate loan structures, as well as reviews cutting edge commercial mortgage rates. Financial Compound’s Michael Schwartz draws on his 25 years of commercial mortgage brokerage experience to review and summarize the current commercial mortgage structuring environment.

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IMN Winter forum 2020 on Real Estate Opportunity & Private Fund Forum

IMN Winter forum on Real Estate Opportunity & Private Fund Forum 2020

17th annual event is held for three days in Laguana Beach. The event is geared toward real estate funding, developing, LPs & service providers on recent regulatory and investment environment. Learn more here

IMN Winter forum 2020 on Real Estate Opportunity & Private Fund Forum 2020

Commercial mortgage broker Financial Compound sponsors the 17th annual Winter Forum on Real Estate Opportunity & Private Fund Investing. Hear Financial Compound’s Michael Schwartz discuss investment strategies for Multi Family transactions in 2020 in his panel discussion on Thursday at 3pm. Financial Compound will elaborate on cutting edge commercial mortgage rates for value-add multi family transaction both rent control and market rent properties.

In 2019 Financial Compound closed loans on numerous value add multi family deals with various commercial real estate lenders and Michael will give his unique perspective on this market.

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Financial Compound – $16.1 million southern CA rent control apartments loan

$16.1 million southern CA rent control apartments loan

These are acquire & reposition bridge loans for rent control apartments. Typically bought with $700 rents and increasing to $1,800 – $2.200 upon renovation after tenants vacate. Financial Compound was charged with finding a lender to make a 70% LTC loan. Most lenders in this space require a minimum 1.0 debt coverage ratio on the existing NOI. That typically translates to a 45% LTC loan on these types of transactions. Financial Compound combed the market for this repeat client and curated a few institutional lenders happy to roll with us at 70% LTC, 4.25%, 5 year term, interest only, 1/2% lender fee, no prepayment penalty. 5 business day close (our quickest ever!).

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Financial Compound – Tax Lien Financing

Mortgage Broker

Tax Lien Financing

Financial Compound arranged a $28 million credit facility for single family tax liens in the Northeast.  Financial Compound, with the help of our borrower, an experienced operator in the tax lien industry, demonstrated the low level of risk (15% LTV) for this credit.  Other terms included a cutting edge interest rate, interest only, close to 100% LTC, with no lender fee.

Municipalities often sell their tax lien portfolio to private investors as a way to obtain liquidity and meet budgetary needs.  Tax lien participants are able to help these government agencies obtain the liquidity which they need.  Financial Compound is able to assist tax lien industry participants with obtaining debt, mezzanine debt, and equity financing.

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Financial Compound – Commercial Mortgage Lenders, shopping center refinance in tertiary market

Mortgage Broker

Commercial Mortgage Lenders, shopping center refinance in tertiary market

Financial Compound has been able to procure $7 million of institutional refinance proceeds for this Kmart (on a short term lease) anchored neighborhood retail center in the Midwest.  The center was originally anchored by 4 big-box tenants all of whom suffered chainwide bankruptcies.  This left the borrower a 220,000 sf center occupied only by Kmart.  The borrower filled in the vacant spaces to 75% occupancy with smaller tenants, changing the dynamic to a multi-tenant center with primarily short term tenant leases.  Kmart store sales at this location are decent, although nothing to write home about.  Not many commercial mortgage lenders were interested in this transaction, although Financial Compound was able to identify one commercial mortgage lender to close the deal.  Loan terms included 98% of all-in-cost (including refinance proceeds, TI and leasing reserves), 9.15% interest rate, 1.45 DCR, 3 years interest-only, with two 12 month extension options, non-recourse, 2% lender fee, prepay penalty 2% in first year.

Commercial mortgage broker Financial Compound canvassed more than 150 lenders over a two year period to locate this lender who viewed the transaction as positively as us.  In general, the capital markets shy away from tertiary markets, and Kmart anchored centers.  However, with a closer look at this transaction Financial Compound helped the lender to notice the superlative aspects of this transaction.

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Financial Compound – Commercial Mortgage Lenders arrange two acquisition loans

Mortgage Broker

Commercial Mortgage Lenders arrange two acquisition loans

Financial Compound arranged two acquisition loans with 2 different commercial mortgage lenders totaling $15,000,000 for the purchase of two adjacent suburban midrise office buildings in North Carolina built in the 1980s.  Building A is 95% occupied, and building B 40% occupied.  Financial Compound surveyed the commercial real estate capital markets and recommended as the optimal financial structure, a fixed rate loan on the stabilized property and a floating rate bridge loan on the other property until it stabilizes. We considered some financing proposals from a few different lending sources willing to make two cross collateralized loans, but opted for two different lenders, each with one building as collateral.

Financial Compound customized SNDA’s and estoppels that were acceptable to both lenders to make the process easier for the property management firm (which was being retained by the borrower).  As both properties were being sold by the same seller as a package, the purchase price was allocated between the two properties to meet each lenders’ underwriting requirements.

Loan terms for the permanent loan included a 5.8% interest rate, 10 year term with a 30 year amortization and loan to value of 75%.  No lender fee.  The loan is non-recourse.

Loan terms for the bridge loan included a floating interest rate of Libor plus 3.75%, 3 year maturity along with two 1 year extensions, a 1% lender fee, 1/2% exit fee.  The loan is non-recourse.

These transactions demonstrate how skilled Financial Compound was able help guide the borrower by identifying a capital marketsopportunity and structuring and customizing the loan terms to achieve the borrower’s objectives.

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Financial Compound – Industrial Refinance in East Los Angeles 32 day close

Mortgage Broker

Industrial Refinance in East Los Angeles 32 day close

Financial Compound worked with a closely held portfolio lender to meet the borrower’s closing deadline to close a $9.8 million industrial mixed use refinancing in East Los Angeles in 32 days.
We navigated several obstacles, including significant research to prove out the borrower’s top-of-market rents for this newer construction, a portion of which was occupied by the borrower’s business enterprise; as well as working with the existing lender who had recently filed a foreclosure action.

Commercial Mortgage Broker Financial Compound made a market for this transaction, identifying alternative financial structures to obtain the proceeds and interest rate desired by the borrower.

Other terms included 80% LTV, 10 year fixed rate, 5% interest rate, 25 year amortization, 1% lender fee.

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Financial Compound – Commercial Mortgage Lenders approve a Discounted Payoff for special use property in Nevada

Mortgage Broker

Commercial Mortgage Lenders approve a Discounted Payoff for special use property in Nevada

Financial Compound, on behalf of a long-standing client, arranged for a $1 million reduction in prepayment penalty so that our client could more easily sell a special use property.  This special use property was encumbered by an approximate $11 million first mortgage loan.  Financial Compound worked with the borrower’s Commercial Mortgage Lenders to facilitate this discounted payoff, providing underwriting and market support for the borrower’s request.  The process resulted in a transaction that accomplished both the borrower’s and Commercial Mortgage Lenders goals.

This lender enjoyed a large exposure to the property type and in 2009 decided that it no longer wanted to have such a large exposure.  Therefore the lender was willing to entertain our discounted payoff request and still earn a strong enough yield on the investment to make the lender happy.  The transaction represents a good example of Commercial Mortgage Broker Financial Compound’s ability to find a common ground between the borrower and the lender, as facilitated and augmented by Financial Compound demonstrating market rates terms and underwriting to help both parties better understand the financial and economic dynamics of the transaction.